Cryptocurrency Glossary

Address: A string of letters and numbers which bitcoins can be sent to and from. A bitcoin address can be shared publicly, and like sending a message to an email address, a bitcoin address can be provided to others that wish to send you bitcoin.

Attack Surface: In computer security, an attack surface refers to the number of places where a malicious user may be able to gain access to a system. In general, a computer running more complex software has a higher attack surface than one running simpler software.

Bitcoin: The first global, decentralized currency.

Bits/Sats: A sub-unit of one bitcoin. There are 1,000,000 bits/sats in one bitcoin.

Block: A collection of Bitcoin transactions that have occurred during a period of time (typically about 10 minutes). If the blockchain is thought of as a ledger book, a block is like one page from the book.

Blockchain: The authoritative record of every Bitcoin transaction that has ever occurred.

BTC: An abbreviation for the bitcoin currency.

Centralized: Organized such that one or more parties are in control of a service.

Chargeback: The reversal of a bank payment or money transfer after it was authorized. Sometimes used to commit fraud.

Cold Storage: The storage of Bitcoin private keys in any fashion that is disconnected from the internet. Typical cold storage includes USB drives, offline computers, or paper wallets.

Cold Wallet: A Bitcoin wallet that is in cold storage (not connected to the internet).

Confirmations: A bitcoin transaction is considered unconfirmed until it has been included in a block on the blockchain, at which point it has one confirmation. Each additional block is another confirmation. Coinbase requires 3 confirmations to consider a bitcoin transaction final.

Cosigner: An additional person or entity that has partial control over a Bitcoin wallet.

Cryptocurrency: A type of currency that uses cryptography instead of a central bank to provide security and verify transactions. Bitcoin is the first cryptocurrency.

Cryptography: In the context of Bitcoin, cryptography is the use of mathematics to secure information. Cryptography is used to create and secure wallets, sign transactions, and verify the blockchain.

Decentralized: Without a central authority or controlling party. Bitcoin is a decentralized network since no company, government, or individual is in control of it.

Distributed: A distributed network is designed so that there is no central server or entity that others must connect to. Instead, network participants connect directly to each other. Bitcoin is a distributed network.

Encryption: The use of cryptography to encode a message such that only the intended recipient(s) can decode it. Bitcoin uses encryption to protect wallets from unauthorized access.

Hash: 1) A unique identifier of a Bitcoin transaction. 2) A mathematical function that Bitcoin miners perform on blocks to make the network secure.

Hot Wallet: A Bitcoin wallet that resides on a device that is connected to the internet. A wallet installed on a desktop computer or smartphone is usually a hot wallet.

Ledger: A physical or electronic log book containing a list of transactions and balances typically involving financial accounts. The Bitcoin blockchain is the first distributed, decentralized, public ledger.

M of N: The number of cosigners that must provide signatures (M) out of the total number of cosigners (N) in order for a multi-signature bitcoin transaction to take place. A common M of N value is “2 of 3” meaning two of the three cosigners’ signatures are required.

Miner: A computer or group of computers that add new transactions to blocks and verify blocks created by other miners. Miners collect transaction fees and are rewarded with new bitcoins for their services.

Multi-Signature: Also called multisig. A bitcoin transaction that requires signatures from multiple parties before it can be executed. Coinbase multisig vaults use this type of technology.

Node: A participant in the Bitcoin network. Nodes share a copy of the blockchain and relay new transactions to other nodes.`

Open Source: Software whose code is made publicly available and that is free to distribute. Bitcoin is an open source project and arguably the first open source money.

Paper Wallet: A type of cold storage wallet where private keys are printed on a piece of paper or other physical medium.

Peer to Peer: A type of network where participants communicate directly with each other rather than through a centralized server. The Bitcoin network is peer to peer.

Private Key: A string of letters and numbers that can be used to spend bitcoins associated with a specific Bitcoin address.

Proof of Work: A piece of data that requires a significant amount of computation to generate but requires a minimal amount of computation to be verified as being correct. Bitcoin uses proof of work to generate new blocks.

Protocol: The official rules that dictate how participants on a network must communicate. Bitcoin’s protocol specifies how each node connects with the others, how many bitcoins will exist at any point in time, and defines other aspects of the network.

Public Key: A string of letters and numbers that is derived from a private key. A public key allows one to receive bitcoins.

QR Code: A digital representation of a bitcoin public or private key that is easy to scan by digital cameras. QR codes are similar to barcodes found on physical products in that they are a machine-friendly way to embody a piece of data.

Signature: A portion of a Bitcoin transaction that proves that the owner of the private key has approved the transaction.

satoshi: The smallest divisible unit of one bitcoin. There are 100 million satoshis (8 decimal places) in one bitcoin. One satoshi = 0.0000001 bitcoins.

Satoshi Nakamoto: The inventor of Bitcoin.

SHA-256: The specific hash function used in the mining process to secure bitcoin transactions.

Transaction: An entry in the blockchain that describes a transfer of bitcoins from address to another. Bitcoin transactions may contain several inputs and outputs.

Transaction Fee: Also known as a “miner’s” fee, a transaction fee is an amount of bitcoin included in each transaction that is collected by miners. This is to encourage miners to add the transaction to a block. A typical bitcoin fee amount is 0.0001 BTC.